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Sunday, July 08, 2001













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`Govt. must help tap outmarkets' -- Mr Trilochan Singh Sahney, Chairman and Managing Director of NRB Bearings

B. Krishnakumar

AIDED by a well-structured capacity expansion plan and thrust towards exports, NRB Bearings has managed to report a superior performance compared to the overall industry trend. The bearings industry is now passing through a dull phase owing to the slowdown in user industries such as automobiles and general engineering. In an interview to Business Line, Mr Trilochan Singh Sahney, Chairman and Managing Director of NRB Bearings, expressed his views on the broad issues concerning the industry.

Excerpts from the interview:

What is the role of the bearings industry?

Bearings are a precision product and are a barometer of the country's technical advancement. A good bearings industry would be the backbone of the country's industrial future. It is a capital-intensive industry with a very long gestation period. One has to go through the learning process, trials, approvals and so on. It is big process and involves huge investments. However, the returns may not flow immediately. Hence, companies face financial problems and the project runs into trouble.

What about overall government policies?

Before 1991, the government's policy was directed at self-reliance. As a result, the government encouraged foreign collaborations and technical-cum-equity participation in the bearings industry. Top global companies including SKF, FAG and Timken now have a presence in the country.

However, a few foreign companies such as Koyo from Japan and SNR from France and a few others came in to the country, but did not succeed for some reason or the other. The entry of foreign companies and collaboration with overseas partners has helped the Indian industry turn very quality-conscious. The domestic industry now contributes in a big way to the requirements of the automobile, which is the key driving force for the economy.

What is the present state of the industry?

The Indian market is very small. It could account for just about 0.6 per cent of the total global market size. The Government, however, has not taken steps to help companies develop markets outside India. The range of bearings produced in the country is limited. It is also unnerving to note that the range has shrunk over recent years. Moreover, the knowledge of design and testing is relatively limited in India compared to global companies. The economy is free and people can now import their requirements if necessary.

Elaborate on NRB's approach.

NRB has a collaboration with the French major, Nadella. We are a major player in the needle roller bearing segment, and cater to the automobile industry in a big way. At NRB, we have concentrated on new product developments and designs and successfully adapted technology to suit Indian conditions. This has given us the expertise to design and develop products in-house. Also, we have our own testing facilities to test the products for life, quality and endurance.

What are the factors behind the better performance?

As is the case with other companies, we have a technological collaboration for specific requirements. On the other hand, we have developed products that have no direct relationship to the core product. So, we are a little apart from other companies. This distinguishes us from other MNCs present in the country. As a result, NRB is now in a position to develop products to suit the customised requirements of its users. It is not to be in the big league, but to be the leader in the current area of operation it has been the key strategy and it has paid off.

Which are the major user segments NRB caters to?

We have a presence in automobiles, textile machinery, electrical, materials-handling and general engineering. The automobile segment contributes about 75 per cent of the turnover. In the automobile market, the OE segment accounts for about 60 per cent, while 30-35 per cent accrues from the replacement market. We have a presence across all segments of the automobile industry, right from two-wheelers to heavy vehicles. Our export earnings are also growing. It contributes about six per cent to the turnover.

Could you rank NRB's performance in the different segments?

We are number one in the needle roller segment and number two player in the cylindrical roller market -- the core area of operations. We also have facilities to produce ball bearings, in which we are not a major force. The presence in ball bearings is to give support to our strategic customers who source needle or cylindrical roller bearings from us. As a result, we are a major supplier of bearings to top companies such as Ashok Leyland, Maruti and Tata Engineering.

What role do imports play?

Imports have not grown significantly in the recent past. This is mainly because of the lack of demand. The industry has just grown at about 5-7 per cent in the last few years. They probably account for about 30 per cent of the bearing market.

Could you give us an estimate of the price gap between imported and local products?

It is very difficult to generalise and arrive at an exact percentage of the price differential between an imported product and one produced locally. In some cases imports are priced at less than half the price of a domestically-produced product. Due to the higher volume, imports are mainly in the ball bearing segment and to an extent in the taper roller bearing segment.

What about present policy issues?

The Government has to take steps to make Indian industry more competitive at the global level. The Government had instead taken steps to protect the industry from imports by imposing protective duties. To prevent the flow of bearings through under-invoicing, the Government earlier imposed specific duty based on the weight of the bearings imported. As a result, illegal imports of bearings have begun creeping in.

Recently, the duty structure was changed to the ad valorem basis. However, there is an anomaly in the duty structure wherein the raw material (bearing quality steel) and the end product attract almost the same level of duty. As a result, the Indian industry has not been able to develop global competitiveness. So, the Government has to take steps to make Indian industry competitive at the global level.

What role do exports play?

Indian companies have to look at the global market as a driver of earnings and not the home market. So, we have already started concentrating on export markets. We now cater to the global automobile industry.

What part do small-scale and unorganised sector producers play?

There is now threat from imports primarily in the lower end of the industry, which is catered by the unorganised sector. The unorganised sector accounts for about 10 per cent of the total market. They are typically present in the lower price segments where technology and precision levels are not significant. They have to be more worried about the imports from China and not the organised sector.

The small-scale industry should not be viewed as the poor man's industry. It just represents a set of companies that are identified based on the scale of operation. Due to sops offered to the small-scale industry, a new unit is started to retain and avail of the sops extended as soon as the threshold limit of small-scale sector investment is reached. It is stopping them from growing big.

As a result, there is no incentive to grow while the productive resources of the country are being wasted in the process. It is not helping the industry at all. So, if you notice, the highest level of sickness is in the small-scale sector.

What was impact of the recent Budget proposals have?

In the recent Budget, the Government decided to withdraw excise duty concession to small-scale bearings producers. However, the Government has now decided against its earlier proposal. If this proposal is implemented, it would have a positive impact on the organised sector players. The Government should identify issues to help the small industry grow in size. Steps could be taken to identify where the small-scale producers are lacking and what their requirements are and lend support accordingly.

What about the possibility of takeovers and mergers?

We have already taken a step in this direction by acquiring Shriram Needle Bearings. There is scope for more such acquisitions could take place. It is just a question of time. It also depends on global trends, the size of the unit and technology of the unit up for grabs.

What has been the impact of INA Bearings entry?

The German major, INA Bearings, is setting up facilities at Pune. However, it would take a long time before they make a serious impact on our positioning in the industry. They will probably concentrate on areas where we do not have a presence. In any case, we are a globally competitive company and we sell at international prices. So there is no incentive to import. Moreover, we have huge capacity which is almost sufficient to cater to the requirement of Indian industry.


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